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Despite Tough Economy, UK Digital Advertising Budgets Continue to Rise

UK estimated to spend highest worldwide percentage of overall ad budgets on mobile by 2016

New York, NY (November 27, 2012)— While the UK economy remains troubled, a new eMarketer report, “UK Digital Advertising: Spending and Trends” finds the country’s digital advertising market is thriving. Spending on online and mobile platforms will rise 14% to $8.8 billion in 2012, according to the report.

Digital ad spending in the UK is expected to pass $10.7 billion in 2014 and $12.4 billion in 2016.

The UK is now the world’s third-largest market for mobile advertising, according to eMarketer. In 2012, only the US and Japan—with projected mobile ad spending of $2.38 billion and $1.74 billion, respectively—will outrank the UK’s $721 million.

As the UK’s GDP and unemployment rate continue to remain low, many advertisers are in no mood to raise expenditures when most consumers’ spending power is shrinking.

Total media ad spending climbed just 1.8%, to $23.2 billion in 2011, eMarketer estimates. In 2012, the industry got a major shot in the arm from the London Olympics and the UEFA European football championships. eMarketer predicts spending on all measured media in the UK in 2012 will be just shy of $24 billion, a gain of 3.4% over the preceding year.

Digital advertising—including online and mobile—will continue to be the main driver of increases in UK ad spending between 2012 and 2016, eMarketer estimates.

Most research firms have predicted growth of at least 10.3% in UK digital ad spending this year. eMarketer has projected 14% higher spending in 2012 and slightly lower growth (10%) in 2013. The majority of sources expected digital ad spending to be between $8.5 billion and $8.8 billion in 2012 and about $9.6 billion next year. Lower estimates, from Strategy Analytics and ZenithOptimedia, exclude mobile advertising.

One clear reflection of the market’s maturity is the investment advertisers are making to reach UK residents on digital platforms. In 2012, an estimated $188 will be spent, on average, for each web user in the country. Historically, this average has been substantially higher in the UK than in the US or Western Europe as a whole.

All digital ad formats will attract greater spending by UK advertisers during the next four years. Search and display will grow more rapidly than email and lead generation, which claim quite small slices of the digital spending pie.

Spending on paid search ads will rise by 15.3% in 2012, and amount to $5.2 billion, or 58.5% of all UK digital spending, eMarketer predicts. Within four years, search is expected to reach $7.1 billion—though its share of the total will slide to 57.1%.

In 2012, some $2.0 billion—about 23% of all UK digital ad spending—will go to display advertising such as banners, rich media, video and sponsorships, eMarketer predicts. Overall, video will be the main force behind higher display investment in the next four years, as spending on online video ads in the UK rises from a projected $273 million in 2012 to $1.37 billion in 2016, according to eMarketer estimates. The rise of real-time bidding (RTB) for ad placements will also encourage display ad spending growth. Expenditures on classified ads will account for an estimated 16% of the digital total in 2012, and rise by at least $110 million per year during the forecast period.

Mobile advertising growth, pegged at 120% for 2012, is expected to remain above 50% until 2016, when mobile ad spending in the UK will approach $3.5 billion.

As a percentage of total media ad spending in the UK, mobile is still tiny—just 3% of all ad expenditures in 2012, according to eMarketer calculations. The UK is the clear mobile leader in Western Europe, though, where no other country will see mobile ads accounting for anything like that proportion of advertising this year. In the US, mobile is expected to constitute less than 2% of the total ad market in 2012.

By 2016, 12.6% of all UK ad budgets will be spent on mobile platforms, according to eMarketer, the highest percentage worldwide.
Mobile is projected to account for 8.2% of UK digital ad spending in 2012, and 27.9% in 2016.

Most people on the go use their mobile phones to seek out information—about local restaurants, stores or transport options, for example—so brands tend to focus their mobile ad spending on search.

Overall, an estimated 74% of UK mobile ad spending will go to search in 2012, compared to 26% spent on display. eMarketer anticipates that the clear dominance of search will continue through 2016, though spending on video formats will register the most dramatic gains during the forecast period.

The full report, available to eMarketer coporate subscription clients only, also addresses the overall ad spending market in the UK, digital ad spending breakdown by industry, and the role of social networks in overall UK digital advertising trends.

eMarketer forms its forecast through an analysis of estimates from other research firms; survey results from brands, agencies and media publishers; digital and mobile ad spending trends; and eMarketer interviews with executives at ad agencies, brands, media publishers and other industry leaders.

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